Europe's extra-territorial mineral trade and clean energy metamorphosis in a landscape of multifaceted risks

Despite modest reserves of energy transition minerals (ETMs) like copper, nickel, and aluminium, European nations largely depend on imports, a dynamic often marred by financial uncertainties, price volatility, and geopolitical tensions. The purpose of this study is to investigate the response of extra-territorial ETM imports to the clean energy objectives of 24 European nations, taking into account financial stress, mineral price volatility, and geopolitical instability. We analyse monthly data from January 2005 to October 2022, using the quantiles via moments (QvM) and the linear models multiway fixed effects (LMFE) approaches to account for heterogeneity, spatial dependence, heteroscedasticity, and endogeneity in the data. Our results indicate that during flourishing market conditions, Europe's extra-territorial mineral imports are positively associated with the clean energy transition. Financial stress, however, negatively affects these imports across various market conditions. Moreover, the EU's mineral imports are adversely influenced by both individual and combined effects of financial stress and mineral price volatility, whereas the impacts of geopolitical risk velocity and financial stress are minimal. Using the LMFE method, we find the influence of geopolitical risk intensification to be insignificant on its own, but when combined with financial stress, it has a negative effect, particularly when addressing endogeneity. Hence, our conclusion highlights the adverse effects of multifarious risk factors on Europe's mineral trade, necessitating the efficient allocation of financial resources and strategic risk management to expedite the region's energy transition.